UK's largest coal-fired power plant could switch to biomass within 10 years

Drax could reinvent itself as a renewable power company. Photograph: John Giles/PA

Drax, Britain's largest emitter of carbon dioxide, could stop burning coal by the end of the decade.

Finance director Tony Quinlan said the company was looking to convert all six units of the coal-fired power station so they only burn biomass, such as wood chip, within the next 10 years.

"Drax is a viable business today as a coal plant," he told the Guardian. "But the opportunity to turn it into a renewable power company is an exciting one and makes sense for the UK's carbon targets and for our shareholders."

The company will only go ahead if the government agrees to grant renewable subsidies to such converted coal plants. Currently only purpose-built biomass plants receive extra payouts to cover their higher costs.

Drax hopes to convert the first unit – capable of generating 660MW of electricity – next year. It is thought that no coal plant of this size has been converted anywhere in the world. "It has not been done before because there hasn't been the need," Quinlan said.

If this proves successful and government subsidies make it economic to do so, two more Drax units could be converted to burning biomass by 2015, he added. The remainder of the 4GW plant – the UK's largest – would ditch coal entirely five years from that date. "If it [the demonstration unit] works then we will develop it as quickly as we can." Drax already does some co-firing – mixing biomass with coal to reduce carbon emissions – and Quinlan said that full conversion was the natural next step. Burning biomass is seen as "carbon neutral" as the material is regrown, allowing the carbon emitted during combustion to be reabsorbed.

The company also said that it could be forced to delay a £2bn programme to build three dedicated biomass plants as it looks to move away from coal-fired generation. The government has not told the company the level of subsidy which will be available when the plants are operational. Drax wants the government's energy review this autumn to provide some certainty before it goes ahead. Chief executive Dorothy Thompson said: "We believe the government is aware of the issue and we are hopeful they will review it."

The search for sustainable biomass

Some environmentalists question how sustainable biomass can be – because growing energy crops can result in rainforests being destroyed or can compete for land with food production.

Greenpeace energy campaigner Joss Garman said: "There's a serious question about whether it's sensible to use biomass in this way. While sustainable biomass is possible, the precious supplies available should be used in much smarter ways."

Drax has biomass supply contracts in place but refuses to divulge where the material will come from, citing commercial confidentiality. Material such as wood chip pellets will be imported from North America and Africa, while UK-sourced biomass like tree stumps and corn stubble will also be used. Drax insists that all of it will be sustainably sourced.

Burning coal is becoming increasingly expensive as a result of new legislation. Coal plants emit about twice as much carbon dioxide as gas plants and the government is pressing ahead with plans to force all new coal plants – and eventually existing ones – to fit expensive, experimental technology to capture the emissions.

The carbon price is also expected to increase, adding to coal plants' costs. New European legislation to limit nitrogen emissions will further restrict their operation.

Over the longer term, gas prices are expected to remain low because of a glut in global supplies as more liquefied natural gas projects come on stream and with the development of technology to exploit shale gas deposits. This is expected to depress Drax's profits as it must compete with gas plants which are cheaper to run. The company said that during the first three months of the year, margins for coal operators hit "historic lows". Thompson admitted: "We are cautious about the outlook [on fuel costs]."

The company announced that pre-tax profits for the first half of the year were up by almost a quarter to £184m.

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